THE STATE OF CUSTOM MEDIA
Custom proves its value in a down economy
Custom publishing, once an afterthought in many marketers' plans, is withstanding the economic downturn and cuts in marketing budgets better than traditional media.
For custom media practitioners, that's no surprise. "By and large the majority of custom initiatives are offered either in a loyalty framework or a CRM framework," says Eric Schneider, CEO, Redwood Custom Communications.
"Marketers still recognize the need to at least be communicating with their key customer segments. It's a continuation of a fairly simple marketing principle that it's cheaper to retain a customer than to acquire a consumer," he says. "In recessionary times, a cost-efficient approach is to try and upsell your existing customers or at [least] retain [them]."
The prevailing view is that marketers know that custom publishing is one of the last areas that should be cut. "In some respects, the time could not be better for custom publishing," says Valerie P. Valente, senior VP-publishing director, Rodale Custom Publishing. "Now more than ever, marketers need to maintain a strong relationship with their current customers and top prospects. Custom publishing is a critical discipline."
Kristen Bohn, group publisher, D Custom, says that b-to-b companies in particular are recognizing the need to stay in constant communication with clients in order to position themselves for retention and new business opportunities. "We've seen a lot of the b-to-b sector very consistent and strong, and they are weathering the storm."
But that doesn't mean everything is status quo. "We're definitely seeing a change," says Ms. Bohn. "We're seeing a lot of clients reducing frequency, maybe a quarterly going to three times a year or integrating with online communications so that they are not missing out on the opportunity to touch their user and continue communicating. It's not like they are cutting out the content, but communicating in a different way."
Changing times
Overall, custom publishers are realistic about the changing times and say that a recession can cut both ways for the industry. In today's economy, marketers are eliminating any effort that represents an extra cost, says Juan José Durán, interactive media director, Televisa Publishing + Digital, which specializes in the U.S. Hispanic market. If not done correctly, he says, custom publishing can mean very low ROI.
"On the other hand, if done correctly, it will dramatically help your marketing goals," Mr. Durán says.
Georgia Galanoudis, custom solutions group director, Meredith Parenthood Group, agrees. "Custom programs deliver on ROI and are generally closer to the purchase decision, thus [custom's] role is cemented. However, this is only true of clients that already engage in these tactics and understand their dynamics. We have seen and will continue to see a decline or delay in new projects being started."
Even outside the U.S., custom publishers are circumspect and taking a wait-and-see attitude. Marcelo Bauer, founder and director, Cross Content Comunicação, a custom publisher based in Brazil—where custom publishing has been booming along with the economy in general—says it's too early to know about the coming year. "At the same time we see some clients postponing projects, we see that others carry on, interested in releasing new initiatives. I believe that early 2009 will be [a time] of adjusting expectations," Mr. Bauer says.
Lori Rosen, executive director of the Custom Publishing Council, the association representing the custom publishing industry in the U.S., says corporate America does realize it needs to make sure its relationships with customers are sound. "I don't think they are going to abandon their custom programs so quickly," she says.
Holding its own
Most research shows custom publishing holding its own. Predictions by Veronis Suhler Stevenson, a private equity fund that publishes reports and projections on the media and communications industry, has said that outsourced custom publishing was one of eight media segments that exhibited double-digit gains during the 2002-to-2007 period and projects that it will be one of six segments continuing to show double-digit gains over the next five years. Spending, according to the company, is forecast to reach $9.21 billion in 2012 and have a compound annual growth rate of 11 percent during the period vs. 16.5 percent during the previous five-year period.
A survey in December by Junta42, a year-old Web site of content marketing and custom publishing, indicated that more than half (56 percent) of marketing and publishing decision-makers plan to increase their content marketing spending for 2009 (31 percent say increase significantly and 25 percent say slightly). Only 13 percent plan on a decrease (9 percent, slightly, and 4 percent, significantly). The survey was conducted among the Junta42 community, which is made up of corporate marketers and publishing/agency professionals. A total of 196 of Junta42's 1,706 subscribers responded to the survey.
"Clearly what consumers want is more information, more accurate information and to be spoken to in a more frequent and [value-oriented] environment, whether print or online," says Joe Barbieri, VP-marketing and digital development, Redwood. "It bodes well for marketers already in this space, including those who are looking for an opportunity to really engage consumers in a valuable way." He says his company has been faring well so far. "We are hoping that's a good omen."
Time Inc. Content Solutions also finds that custom publishing appears to be holding its own. "Demand for professionally produced content continues to rise," says Chris W. Schraft, who serves as president of both Time Inc. Content Solutions and sibling Liquid Dialog, a digital marketing services company. "Marketers who have print-only programs are adding digital content platforms to complement and extend these efforts.
"Those who have Web programs are requesting next-generation upgrades and incorporating social media and syndication tools," Mr. Schraft adds. "Those who use social media tools are expanding into mobile solutions. Those who have first-generation sites are engaged in heuristic evaluations and usability testing, and preparing for redesigns based on their findings."
This is taking place as part of today's trend of integrating a variety of distribution methods for custom publishing programs. While print is still dominant, digital—particularly the Web and, to a lesser extent, mobile—is growing.
The forecast from the Jack Myers Media Business Report is more dire. It predicts a decline of 8 percent in 2009 and 6.5 percent in 2010 after years of double-digit growth, with only 6 percent growth in 2008.
Anecdotally though, Ms. Rosen says everything seems to be in a good place. "Usually you can feel when things are dismal or slow, but [that's not happening]." Even sectors that are struggling, such as automotive and financial, haven't cut programs across the board. Automotive clients, for example, are saying, "If we're going to spend a dollar in advertising, it's going to be in the custom magazine [area],"Mr. Schneider says.
Down slightly
However, the CPC's latest annual survey, conducted in 2008 by Publications Management, did show custom publishing spending by corporate America decreasing, although very slightly, for the first time since the survey was conducted in 2000. Spending for 2007 was reported at $55 billion, down from $55.6 billion, but still considerably higher than the $29.8 billion reported five years earlier.
The programs that are most sensitive to recession are those that are dependent on third-party advertising, such as in-flight magazines and retailer publications. They are the most challenged and the ones seeing their cost per copy rising, thus affecting ROI. The trend in the industry, however, has been toward more publications not depending on outside ad support as a revenue stream. The CPC survey for 2007 found that the number of publications accepting paid advertising slid for the second consecutive year, falling to 23 percent of publications. Some 68 percent of companies reported no paid advertising in their publications, and 9 percent reported only in-house ads.
While funding by third-party advertising is welcome, some custom publishers believe it is distracting. "When you are looking for revenue-cost offsets first, it dilutes the message and the value it brings back to the brand," says Mr. Barbieri.
The model is definitely changing, says Ms. Bohn, whose company produces no ad-sponsored publications at this time. She adds that marketers are realizing that if they are going to undertake a custom content program, a key reason is to have the space to communicate with their specific audiences. Selling valuable real estate just doesn't give them enough space to get their message out there and still provide value to the reader, she says.